US VIRGIN ISLANDS TRENDS AND DEVELOPMENTS Contributed by: Marjorie (Jorie) Roberts, Sean E Foster, Renée Marie André, David Bornn, Lisa M Wisehart and Duncan J J Kessler, Marjorie Rawls Roberts PC
cal device technology. Oversight of the RTPark Program is vested in the seven-member RTPark board of directors which includes the chairper - son of the UVI board of trustees and the presi - dent of UVI. In most cases, an applicant, through a legal rep - resentative, negotiates the terms of its tenancy with the RTPark’s executive director. Negotia - tions include: • the amount of the one-time entry fee paid by the applicant (typically at least USD50,000 and up to USD100,000, depending on the size of the applicant); • the applicant’s obligation to pay annual management fees to the RTPark (typically between 1% and 3% of the applicant’s gross income); • the structuring of a charitable donation to UVI that can include scholarships, intern - ships, faculty support, funds for specific programmes and in-kind contributions of time, typically starting at a total of USD35,000 annually; and • the percentage of equity interest to be award - ed to the RTPark (which can be non-voting and have different distribution rights to those of other owners), which is typically 1%. Once negotiations have been finalised, a term sheet is entered into between the applicant and the RTPark, providing the basis for the formal application that covers the applicant and its owners. The final terms are memorialised in the Protected Cell’s Park Tenant Agreement, which serves as the operative document defining the relationship between the Protected Cell and the RTPark. Each RTPark application requires pay - ment of a USD2,500 application fee.
Benefits under the RTPark Program are initially available for 15 years and can be renewed for an initial period of ten years, followed by subse - quent renewal periods of five years, subject to board approval. As with the benefits under the EDC Program, the RTPark offers numerous tax exemptions and reductions, the most notable of which is a 90% tax credit on eligible income earned by the RTPark Protected Cell. The Pro - tected Cell’s tax credit applies to its income tax liability on income from the business for which benefits are granted. Such income must be effectively connected with conducting a USVI trade or business under Sections 934 (b)(1) and 937 of the Code. For a corporate Protected Cell, the reduction results in an effective tax rate of approximately 2.31% on eligible income. If the beneficiary’s owners are individual residents of the USVI, they will receive a reduction in their dividends or allocations. Salaries, however, are fully taxable. No withholding tax is imposed on payments to US corporations or individual residents. Further - more, RTPark beneficiaries with foreign corpo - rate owners are exempt from withholding tax on interest payments and enjoy a reduced withhold - ing rate of 4.4% on dividend payments overseas (while the withholding rate on non-resident indi - viduals is 4%). The tax rates on royalties paid to non-resident individuals or foreign corporations are 4% and 4.4%, respectively. The withholding tax is paid by the withholding agent (typically the RTPark beneficiary) to the Virgin Islands Bureau of Internal Revenue (BIR) on Form 8109 and then reconciled annually on Form 1042. As with the EDC Program, beneficiaries receive an exemption from USVI gross receipts tax, otherwise imposed at 5% on the gross receipts of a business, with no deductions. This exemp - tion does not apply to gross receipts from busi -
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